Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Max Fletcher who wrote (4256)	3/28/2010 7:33:34 PM
From: Kip S	1 Recommendation Respond to of 34328

Max, I do not personally agree with the 60/40 stock/bond allocation. Nor am I a fan at all of bonds for individual investors (except as a means of speculating on interest rates). Although I cannot cite it, there is some evidence that a portfolio of 90% (presumably something like S&P 500) equities and 10% cash results in about the same level of volatility as the traditional 60/40 stock/bond allocation. Also important to remember that Social Security and pension benefits are bond-like, and should be treated as such in your allocation decision. My approach, both in retirement and before, is to invest in equities and keep a level of cash that makes you feel comfortable. When I am working, my cash level is between about 2% and 4%, depending on expenses, options activity, and other factors. When I retire, I will probably raise that to something higher--whatever makes me comfortable. Another way of thinking about this is to invest in stocks and use some of that extra return you get over time to hold cash--both to dampen volatility and to serve as a cushion so you do not need to liquidate your investments at an inopportune time. Another reason I am not a bond fan is that interest is taxed as ordinary income. You get neither preferential dividend taxation nor any real ability to generate capital gains.

To: Max Fletcher who wrote (4256)	3/28/2010 8:59:43 PM
From: Steve Felix	Respond to of 34328

Don't know if you have read them, but we have had some discussion here of pensions and Social Security = bonds. I decided a while back what money I HAD TO HAVE to be completely positive the wife and I get through the six years from when she retires until we are eligible for SS. It is in six laddered CDs. I can't count how many times I have been tempted to do something else with it, but then I always remember its purpose. Current average yield of 3.34 sucks, but the NAV isn't going to change. It will probably continue to drop, but I do have the ones for 2013 and 2014 at 4.41%. They make up about 22% of our overall holdings. Starting next year, we could spend it all by the time we are 62. That would leave us with nothing but stocks, but in actuality, our income will be replaced by the wifes pension and SS. Even though we have no bonds, we will essentially be living off of what I consider bond income. With our current SS estimates and her pension, figuring a 5% return ( payout ) would have us having over 1 million in bonds. I don't know why I would need more. In settling for low current "bond" income, I should be able to reinvest my dividends at a minimum until age 62, and hopefully for a long time thereafter. If one of us dies before SS age, they can take the dividend income, replacing the others Social Security if needed. I also think bonds are in a bubble. So I think it comes down to your comfort level. Would not having a bond portion affect your life or sleep quotient?